2. Retail Institutions by Ownership
• Independents
• Chain
• Franchise
• Lease Department
• Vertical Marketing System
• Consumer Cooperative
3. Independents
• An independent retailer owns one retail unit
• Seventy percent of independents are run by owners and their families
• Just 3% of U.S. retail sales
• Ease of entry
• Low capital requirement
• No or simple licensing provisions
4. Independents
• Intense competition and high failure rate
• One-third of retailers do not survive the first year
• Two-thirds do not continue beyond the third year
• Most failures involve independents
5. Independents
• Flexibility: formats, location, strategies
• Investment Costs Down: fixture, worker, merchandise
• Specialists: niche of particular goods/service catgory
• Strong Control: strategy, decision making, operation
• Image: personable retailer with a comfortable atmosphere
• Consistency: only one store is operated
• Independence: no directors meeting, labour unrest etc.
• Entrepreneurial Drive: if you want to get ahead, own a small business
6. Independents
• Lack of Power: No bargaining power because of small quantity
• No Economies of Scale
• Labor Intensive: less efficient than computerization
• Limited Access to Advertising
• Over-dependence on Owner
• Limited Resources for Long-run Planning
7. Chain Store
• Operates multiple outlets under common ownership
• Centralized purchasing and decision making.
• Larger operation
• Chains account for 65% of U. S. retail sales and employment
8. Chain Store
• Bargaining Power
• Cost Efficiencies
• Operating Efficiencies
• Technical Abilities
• Advertising Availability
• Defined Management Philosophies
9. Chain Store
• Time and Resources Spent on Long-run Planning
• Limited Flexibility
• Investments High
• Managerial Control Difficult
• Limited Independence for Personnel
10. Franchising
• Franchising involves a contractual arrangement between a franchisor and
a retail franchisee
• Franchisor allows the franchisee to conduct the business under and
established name and according to a given pattern of business
• The franchisee pays an initial fee and monthly percentage of gross sales
11. Franchising
• Product or trade mark franchising: Franchisee acquires the identity of a
franchisor, freedom for time, location, format etc.
• Business format franchising: location, quality control, display, layout,
cooperative advertising etc.
12. Franchisee benefits
• Small Capital Investment
• Brand Awareness
• Operation Procedures and Management Skills
• Cooperative Marketing
• Exclusive Selling Rights
• Purchasing Costs
13. Franchisee problems
• Oversaturation: too many franchise in one area
• Franchisor Overselling: overzealous selling by some franchisors
• Contract Provisions:
• Cancellation Clauses
• Short Duration
• Gross Sales Based Royalties
14. Franchisor Benefits
• National or Global Presence
• Ownership Qualifications Set
• Money Obtained on Delivery
• Stringent Rules for Franchisees
• Franchisee Work Incentive
• Royalties Continue
15. Franchisor Problems
• Damaged Reputation
• Loss of Customer Loyalty
• Intra-franchise Competition
• Reduced Resale Value
• Injured Profitability
• Franchisee Desire for Independence
16. Leased Department
• It is a department in a retail store
• Normally pays a percentage of sales as rent
• The store sets operating restrictions for the leased department to ensure
overall consistency and coordination
• It broadens its offerings
• Most common for instore beauty salons, watch/mobile repair, studio,
restaurants etc.
17. Leased Department: store perspective (merits)
• Fills Merchandise and Expertise Gaps
• Enlarged Market
• Reduces Store Costs
• Lessee Assumes Administration Rol
• Percent of Revenues
18. Leased Department: store perspective
(demerits)
• Conflicts in Operating Procedures
• Damaged Image
• Customer Blame
19. Leased Department: leasee perspective
(merits)
• Well Know Store
• Reduced Costs
• Economies of Scale
20. Leased Department: leasee perspective
(demerits)
• Inflexibility in Hours
• Product Line Restrictions
• Raised Rent
• Sales Expectations Not Met
21. Vertical Marketing System
• It consists of all the levels of independently owned businesses along a
channel of distribution
• Types:
• Independent vertical marketing channel
• Partially integrated system
• Fully integrated system
